Retirement Planning

How To Get The Most Out Of Your Retirement Savings

Did you ever think about what would happen to your retirement nest egg if you happened to retire during a down market? Everyone knows the cardinal rule: never do a double negative. Never take money out of your investment account during a down year. But where does that money come from if it’s not coming from your investments? Stick around to the end of this blog to find out.

Will you be retiring in a down market? Keep this in mind. Since 2009, the market’s been only down once, and that was 2018 when the market was down about a little over 4%. Now, the average bull market lasts seven years. But here we are 13 years later and the market’s still chugging along. So the question again is, will you be retiring in a down market? Now, conventional wisdom tells you to either invest in safe assets if you’re concerned about a down market or to balance your portfolio. Maybe 40% bonds and 60% stocks or 60% bonds and 40% stocks. But they don’t tell you what happens if the bond market is down at the same time the stock market is down.

Here’s a question, where is it written that you have to lose 50, 60, 70% of your portfolio in order to earn money? Why not choose an asset that’s not correlated to the stock or bond market? So that you’ll get a reasonable rate of return and you’ll have liquidity, use, and control of that money so you could access the cash to supplement your retirement income when there’s a down market giving your portfolio a chance to regenerate or to regrow itself without having the double negative of a market loss and an annual withdrawal. 

The point is that conventional portfolio solutions have downsides, and those downsides can be detrimental to your nest egg. A better solution may be using a specially designed whole life insurance policy as a volatility buffer to protect your nest egg so you don’t have to make a withdrawal in a down year ever again. It allows your portfolio to regenerate itself, to grow back, and it still gives you the income you need in retirement.

We’re going to take a look at why you would want to utilize cash value life insurance as a volatility buffer to supplement your portfolio. Let’s say you have a hundred-dollar portfolio and your portfolio loses 20%. Well, now you’re down to $80. But did you ever think how hard you have to work on that $80 in order to get back to even? You lost 20%, but you got to earn 25% of the $80 in order to get back to $100.

Now, let’s throw in taking money out of the portfolio to supplement your retirement. You have the same hundred-dollar portfolio, the same 20% loss. Now you’re down to $80, but you take out $10 to supplement your retirement income. Now you’re down to $70. You have to earn 42% on the $70 just to get back to even. As you could see your money has to work that much harder just to get back to even or else you’re going to run out of money faster. Here’s the key, make sure your money is working smarter, not harder. Using a specially designed whole life insurance policy as a volatility buffer is a great way to get the most out of your retirement savings.

If you’d like to get started with a specially designed full life insurance policy for accumulation as a volatility buffer in your situation, be sure to visit our website at tier1capital.com to get started today. Feel free to schedule your free strategy session. And remember, it’s not how much money you make, it’s how much money you keep that really matters.

Retirement Planning: How to Avoid Paying Higher Taxes

What would be the safest way to make your money last longer in retirement? Wouldn’t it be to reduce or eliminate your tax obligation? Stick around to the end of this blog and we’ll show you how to use a specially designed life insurance policy to reduce or eliminate your tax obligation and keep the government’s hands out of your retirement.

When people come to me with their yet-to-be-taxed retirement accounts: 401K’s or IRAs, they’re literally shocked as to how much taxes they’re on track to pay in retirement. The reason they’re shocked is that that’s not what they were told. They were told that they were going to be in a lower tax bracket in retirement. So let’s take a look at exactly what happens when you’re making contributions to your IRA, 401K, 403B, or your other qualified retirement accounts.

Basically, you’re putting a piece of your income into these accounts and you’re deferring the tax into the future. As your account grows and the interest accumulates, eventually you’ll have a large pile of money to use for your retirement. But what happens is, as that money is growing, so is your tax obligation. Here’s the key to utilizing specially designed life insurance to help supplement your retirement. We know what taxes we have the potential to avoid. We just don’t know what the rates are. 

There are six potential taxes you could avoid by using these specially designed whole life insurance policies. That includes:

    • Federal income tax
    • State income tax
    • Social security offset tax
    • There’ll be no increase in your Medicare premium
    • In most states, you’re going to avoid probate and state inheritance tax. 

So what would it look like and how would we proceed to move money from forever taxable in a qualified retirement account to never taxable in a specially designed whole life insurance policy? Basically, after age 59 and a half (so you could avoid the 10% penalty for withdrawals prior to age 59 and a half), we would start taking distributions to fund the annual premium on your life insurance policy. 

The key questions you need to ask yourself are basically, do you think taxes are going up in the future? Do you think that with everything that’s going on in our country, and keep in mind we’re $30 trillion in debt, do you trust the government to do what’s in your best interest or what’s in their best interest? And if you think taxes have the potential to go up really high, here’s the question, do you want to pay those taxes? And I bet there’s not a lot of people that asked you that question. But the key is you have a choice. What choice will you make to make sure that your money lasts longer in retirement?

If you’d like help designing a specially designed whole life insurance policy for cash accumulation to help your retirement go further and keep the government off your payroll. Be sure to visit our website at tier1capital.com to get started today. Feel free to schedule your free strategy session. And remember, it’s not how much money you make, it’s how much money you keep that really matters.

How To Fund Your Retirement

Are you wondering what the best type of account is to use to fund your retirement?

There are so many accounts and so many rules, it could all get a bit confusing. But if you’re wondering how to use a cash value life insurance policy to help supplement your retirement income and why it’s a good move, make sure you stick around to the end of this blog.

Conventional wisdom tells us that we should be saving in tax-qualified retirement plans: 401ks, 403Bs, and IRAs. But keep in mind that these accounts didn’t come into fashion until the 1970s. Prior to that, everybody saved in passbook savings and cash value life insurance. Before the 1970s, only the “rich people” had financial advisers, had stockbrokers. But with the introduction of these new qualified plans, it made investments accessible to everyone. I mean, almost everyone either has a retirement plan or could very easily open one up. The way they enticed us to invest in these accounts is with the tax deferment – the tax benefits. 

What happens is we avoid the taxes today, but we are actually postponing them into the unknown future. Thinking about where our economy is, where our government is today, and where they could be going in the very near future, perhaps before we hit retirement or when we hit retirement age – is postponing taxes really a good idea for us?

It may be a good idea for the government because they get to determine what the tax rate is when we go to pull that money out. They say, “How much money do we need in tax revenue?” And then they say, “Oh, let’s just adjust the tax brackets to accommodate our needs so we could fulfill all these promises that we’ve made”.

The key is, that once the government gets us in these accounts, they can do whatever they want. Basically, there are two strategies you can employ for saving for retirement.

Strategy A is to take a tax deduction on a small amount of money today, put it in a place where you can’t touch it until age 59 and a half, and then the government could tax you on every dollar that comes out of there at whatever rate the government sees fit to pay its bills. 

Strategy B is to pay tax on a small amount of money today and let it grow on a tax-deferred basis, but you’ll have complete liquidity use and control of that money to use it for whatever you want, whenever you want, no questions asked. But then when you get to retirement, the government could never tax that money ever again unless you choose for them to tax it. 

Which strategy would be better for you? Strategy A or Strategy B? 

In case you’re new to this blog, Strategy B is a specially designed whole life insurance policy designed for cash value accumulation, and the key is to start this policy as soon as possible. Why? It’s simple: compound interest. Compound interest takes time and it takes money. Once time is gone, we can never get it back. But these policies allow us to save consistently – month after month, year after year. We’re stashing money away in these policies so we could build that compound interest curve. On top of that, there are added benefits like the disability waiver of premium, where if you were to become disabled and unable to work, the insurance company is going to pay your premium for you. We also have the death benefit, guaranteed cash value growth, and guaranteed liquidity use and control via the policy loan provision.

So how do you access your money in retirement from a life insurance policy? Well, it’s very simple. Tax-free distributions are available up to your cost basis. What does that mean? Basically, it means that the amount of money you put in will come back to you tax-free. If you put in 100,000, the first 100,000 that comes out of the policy is tax-free. Over and above that, you can access the money through a loan feature. 

Now, if your distributions from a life insurance policy are tax-free, what does that mean? It means that there’s no federal income tax, there’s no state income tax, there’s no Social Security offset tax, there’s no increase in Medicare premium, and in most states, life insurance death benefits pass outside of state inheritance taxes. So that’s five taxes you’ll be able to avoid in retirement.

Another way that life insurance can be used to supplement your retirement is to act as a volatility buffer in conjunction with your investment portfolio. So how does that work? Basically in a down year, instead of taking money out of your retirement account, you take the money out of your life insurance account. What that allows you to do is it allows your portfolio an opportunity to regenerate itself after a down year. One of the worst things you could do for your investment portfolio is taking a distribution in a down year. By instead taking money from the life insurance policy, it allows your portfolio a chance to regenerate and recover instead of taking that double hit in a down year.

As an added bonus if you’re saving for retirement using life insurance, you’ll have access to that money everywhere along the way. So you can use it to pay for a wedding, to pay for your children’s college, to buy a car, to invest in a business or the stock market. Again, complete liquidity, use, and control of your money. Complete liquidity, use, and control of your money on top of uninterrupted compounding of interest. That means the performance of your policy won’t be affected even if you have a policy loan. As long as you’re with a company that uses non-direct recognition, meaning the dividends credited to your policy won’t be impacted even if you have a policy loan. 

In conclusion, a specially designed whole life insurance policy for cash accumulation is a great way to save for retirement, but it’s also a great way to protect your family and your business along the way because you have full liquidity use and control of your money and the ability to access that money without interrupting compound interest.

If you’re ready to get started with a whole life insurance policy for you and your family, schedule your free strategy session today. 

Money Management Tips: Regain Control Of Your Cash Flow

If you have been following our blog post, you know that we are constantly talking about the importance of you being in control of your money or regaining control of your money. So why is it so difficult to accomplish despite it being a very simple concept? Today, we are going to talk about the unintended consequences that result from following traditional or conventional wisdom when it comes to your finances and how to regain control of your money by just knowing these things.

Now there are three main institutions that are trying to gain control of our cash flow on a monthly basis: the banks, Wall Street and the government. It is like a game to them in the sense that they set the rules. These rules are:
1. Gain control of as much of our money as possible.
2. Get that money on a systematic basis, meaning they want their hands in our checkbook every single month.
3. Hold on to or control that money for as long as possible.

We are going to take a look at how Wall Street gets us to act in their best interest. By following the rules that benefit them. Firstly, they want to take control of our money. So how do they do that? They will tell you that the only chance you have to beat inflation is to be in equities. They tell you that you have to be in it to win it. They tell you to employ strategies like dollar cost averaging. That’s how they get us to do things on a systematic basis. Also, they tell you that the higher the risk, the higher the reward. So these are things that they tell us to get us, to play the game by their rules so that they could win. Secondly, when the market is down, they tell you that you can’t sell now because you are going to be locked in losses. But when the market is up and you say, “Hey, I wanna sell because I think we made a pretty good profit”. They will say, “Geez, I don’t want you to miss out on this profit”. Plus if you sell now, you have to pay taxes on the gains. So if you don’t sell low, because they don’t want you to lock in losses and you don’t sell high because they don’t want you to pay taxes or miss out on a run, then, when do you sell? Well for Wall Street’s benefit, they never want you to sell.

You see, their job is to get you in the market and keep you in the market at all costs because that is what benefits them, but it doesn’t necessarily benefit you.

 

Now, how do the banks get us to do what’s in their best interest? Let’s take a look at the rules again. Rule number one is they want to get our money. So when it comes to a mortgage, we want to put a downpayment as high as possible. Because with a lower loan or a lower mortgage, you will pay less interest. Rule number two, they want to get our money on a systematic basis. So they will entice us with lower interest rates on shorter term mortgages. For example, a 15 year mortgage will have a lower interest rate than a 30 year mortgage. Rule number three,  they want to keep our money for as long as possible. So with the 15 year mortgage, we’re giving up more of our monthly cash flow to the bank. Even though we’re paying them less interest, we’re still losing control of that monthly cash flow. With the home equity, they tell us that it’s our home equity as if we have control of it and that we are more secure when our house is paid off. But in reality, we don’t have access to that money unless they give us permission to access that home equity. So who’s really benefiting from a shorter mortgage, us or the banks? The answer is clear. The banks are following the three rules and they are in control of our money by positioning it as if we are in control and that it is in our best interest.

Finally, the government gets us to play the game by enticing us to invest in retirement plans for our future. They give us a tax deduction on a small amount of money today so that money can grow on a deferred basis and then they have the potential to tax us at a much higher rate in the future.Think about it, you are putting money away today for a small tax deduction, but in the future, the government determines how much of that money you get to keep. Even if you earn a decent rate of return over many years, you don’t know how much of that money is actually going to be available to you to fund your retirement lifestyle. The government gets us to play the game, but they are also consulting with Wall Street and the banks to create the rules. Who else benefits when we participate in retirement plans? Wall Street, because they get to hang onto our money until 59 and a half, or we pay a penalty and tax. Secondly, the bank’s benefits because if we’re maxing out our retirement account contributions, that means our money is tied up. When the time comes that we have to pay for our children’s college education or buy a car or go on vacation, we don’t have access to our money as it is tied up in retirement accounts or home equity. Therefore we have to borrow more money and who benefits when we borrow more money? Obviously it’s the banks.

Now that  we have  looked at how the government, Wall Street and the banks get us to follow their rules so that they can win and can be in control of our money, what’s the alternative that is not following their conventional financial advice?

The alternative is to save in a place where you have full access and control of your money. A place where your money could grow on a continuous compound interest scale and never be interrupted even after you spend the money. We accomplish this by saving in a specially designed whole life insurance policy, where we get to control our money, where we have full liquidity use and control and access to our cash value for whatever we want, whenever we want. So that we will not be forced to go to the banks to borrow and give up control of our monthly cash flow.

If you’re interested in learning more, book your free strategy session today  to know exactly how we can accomplish this. Remember it’s not how much money you make. It’s how much money you keep that really matters.

How to Protect Your Retirement Savings

When it comes to financial planning, we all have one end goal in mind. That’s retirement. If you’re concerned about whether or not you’re going to be able to reach your retirement goals, no matter your age, this is for you. In this blog post, we will talk about the roadblocks that could be holding you back from reaching your retirement goals.

For the past thirty seven years as a financial services professional, when people come to us with their yet to be taxed IRA or 401K statements, they are generally shocked when they find out how much they have to pay in taxes.

Why is that so? It is because that’s not what they were told throughout their whole working career. They were told that during retirement, they would be in a lower tax bracket, but that’s not the case. You may be wondering why?

It was as if they were traveling down this road towards retirement with one foot on the gas pedal and one foot on the brake. They were setting aside as much money as they possibly could into their IRA or 401k or 403B, that’s the foot on the gas pedal. At the same time they were paying down their mortgage while watching their kids grow up and leave home. They lose those deductions by the time they reach retirement. They just can’t defer income into the future and eventually they lose those deductions. That’s the other foot on the brake.

If you’re traveling down a road with one foot on the gas pedal and the other on the brakes, are you making any progress?

Aside from losing all of your deductions, there is this ever changing tax code that we have to consider. There’s this old saying in Washington, “If you’re not at the table in Washington, you’re on the menu”. When’s the last time you were at the table in Washington? As for me, I’ve never been there.

Our country has $29 trillion in debt. Clearly we have a problem. But every time they meet in Washington and pass a new bill, it seems like they just keep on increasing spending like a drunken sailor. Now let me ask you this. If you have a spending problem or a debt problem, does it make sense to increase spending? If they’re not going to address the issue, then there’s only two ways the government could respond to try to fix this problem.

* Legislatively. They will increase taxes. How will this affect your retirement?
* Administratively. They can print more money and when they do, it results in inflation. What does inflation do to the value of your savings in retirement?

We call inflation the stealth tax. It subtly eats away the buying power of  money. You don’t even realize it most of the time but this is what inflation is doing to our cash value. Right now in 2022, it is blatant what inflation is doing to our money. But we don’t realize that the value of the dollar is decreasing little by little over time. The moment we get to retirement, it’s also very blatant that the buying power of our dollar is ever decreasing due to inflation.

When people come to us with their yet to be taxed retirement plans astounded as to how much they have to pay in taxes, when we haven’t even addressed the inflation issue, what are our options? Many don’t realize that after you earn your income and you pay your tax, whether or not you pay tax again on that money, the rest of your life is optional. It’s voluntary. The key is knowing what your choices are up front.

Whether you are in Gen Z or a Baby Boomer, or in any generation in between, you have two options on how to save for your retirement.

Strategy A
Take a tax deduction on a small amount of your cash value today and anticipate that it grows into a bigger amount in the future knowing that the government could tax at any rate when necessary just to solve the inflation issue.

Strategy B
Pay tax at a small amount of your cash value today and put it in a place where the government could never touch it ever again. So when you get to retirement you can be in control of how much tax you actually pay.

Which strategy would benefit you and your family more? Strategy A or Strategy B?

It is our mission to help as many families as possible, make the best financial decisions that would benefit them. That’s why we present you with these strategies because we believe that it is more beneficial to pay a small amount of tax on the small amount of income, rather than deferring it into the unknown future.

If you are ready to learn how to utilize these strategies to work for you in your specific situations, schedule your free strategy session today

Remember it’s not how much money you make, it’s how much you keep that really matters.